When you work in manufacturing, you will hear terms like Cycle Time, Lead Time and Takt Time being used often. And it can get extremely confusing since people can use these terms interchangeably. However, these terms are different in what they measure and how they’re calculated.
Knowing what each of them means and how to calculate them is essential to optimizing processes. That way, value can flow uninterrupted to the customer and increase customer satisfaction. Keep on reading.
What is Cycle Time?
Cycle Time is the amount of time it takes to produce a single unit of your product, from the beginning of the process to the end. To calculate Cycle Time, you look at the amount of time (minus lunch hour) you have per day or shift for work versus the number of units you actually produced.
This is illustrated in the formula below:
Production Time per Day or Shift / Total Units Produced = Cycle Time
What is Lead Time?
Lead time is the amount of time it takes a product to go from order placement to delivery. Lead time is best illustrated with an example.
Let’s say that your organization got an order on the 18th of September and it was delivered on the 23rd of September. The lead time here is 5 days. It doesn’t matter if you started working on the order on the 20th. All that matters is the time it took from the order being received to finally being delivered so that you get paid.
What is Takt Time?
Takt Time is simply the rate at which you need to produce a single unit in order to satisfy customer demand. It allows you to optimize your team’s capacity based on the customer’s order.
You can calculate Takt Time using the formula below:
Production Time per Day or Shift / Customer Demand (Units Ordered) = Takt Time